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New CEO Advances Whitestone REIT’s Ecommerce Resistant Community Shopping Center Strategy

David K. Holeman


Whitestone REIT


Investor Contact:

David Mordy, Director of Investor Relations


Interview conducted by:

Lynn Fosse, Senior Editor

CEOCFO Magazine

Published – April 11, 2022

CEOCFO: Mr. Holeman, what is Whitestone REIT?

Mr. Holeman: Whitestone is a shopping center, real estate investment trust. We own centers in Texas and Arizona. Our centers are occupied by tenants that are compatible or resistant to ecommerce and rent relatively smaller spaces. We are a public real estate investment trust traded on the NYSE under the ticker “WSR,” headquartered in Houston Texas with approximately ninety employees.

CEOCFO: Why this type of REIT?  What do you like about this type of community?

Mr. Holeman: There is a lot to like about the type of properties we own. Our typical property is about 100,000 sq. ft. They are embedded in great submarkets in the largest cities in Texas and Arizona. They have become part of the community; they are part of the center where you might drop off your dry cleaning or your children might get educational services, or you might find your favorite restaurants.

One of the things I love about being in this job is getting to know the businesses that occupy our centers. Many of those businesses are entrepreneurial businesses, family-owned, and it is a lot of fun to get to know those businesses and try to help them succeed at what they are doing and from that Whitestone and our shareholders profit as well.

CEOCFO: What are some of the challenges?

Mr. Holeman: With any business there are always challenges. We feel really good about the position of Whitestone, the strategic markets we have chosen to operate in, and the tenant mix we have put together. We feel we are in a good position to meet any challenges that may come our way. The last couple of years have been unprecedented for all of us, and we have tenants that are trying to run their businesses and provide services to their communities, and we have been helping them do that. As a public company we know there are more and more investors that look for businesses to deliver consistent sustainable growth.

When I think about the challenges we have had over the last couple of years, I am impressed by the strength of the team’s character, the resilience and fighting spirit of our tenants, and it validates our strategic decision to operate in the markets we are in. One of the biggest challenges for any business is attracting and keeping talented people. Any business is only as good as the team of people they put together and I think we have done a good job of that, providing a culture, business and strategy that is attractive and allows people to grow and develop within the organization.

CEOCFO: On your site when describing your property type, I see “culturally diverse neighborhoods.” Why is that important?

Mr. Holeman: It is embedded in what we do. We operate in the large markets in Texas and Arizona in locations surrounded by neighborhoods that have a mix of different cultures and therefore our tenants are made up of people that come from different places and have different backgrounds. We think that mix is important, and by having a diverse employee base we are able to understand their needs and operate our properties in ways that help them succeed.

Key for what we do is really understanding consumer patterns and interests. As owners of shopping centers what we want to do is create a place where people want to come and spend time. In order to do that, it helps us to understand the different drivers and backgrounds. It is part of what we do, and I think it makes us all stronger by having different perspectives and different backgrounds.

CEOCFO: Would you give me an idea of one or two local properties and why is someone going there other than it is convenient?

Mr. Holeman: I will talk about Market Street and DC Ranch in Scottsdale, Arizona. It is a property we have owned for about eight years. It is embedded in a very nice community in Arizona. It is about 200,000 square feet; it is grocery anchored with a national grocer that is part of the center and makes up about 20% of the square footage. It is a key tenant but not a super large one in the center. What makes that property stand out are events and the variety of services offered. For instance, in that property, we look to engage the community and have community events. We have a Christmas event there called Cocoa Stroll where Santa comes, and it involves lots of members of the community, so we are looking to engage and conduct events on our properties that are important to the community. From a tenant mix what we did was try to understand the surrounding community. The community is made up of a lot of families with children, so it is important that we have tenants that meet the needs of these families. We do that by providing a mix of tenants that include food, grocery and restaurants, self-care, health and wellness, financial services, and education and entertainment. Examples include a family-oriented restaurant called All American Sports Grill, a financial services provider, Edward Jones, a great education and entertainment tenant called Mathnasium and health and wellness tenants, The Pilates Room and AZ Smiles Dental. Ultimately the mix of tenants is a key element that drives you to the center.

Whitestone focuses on the outdoor gathering areas, in states with warmer climates, so a lot of time is spent outdoors. We build out common areas that are places where people come and have family pictures and come to events. A more recent acquisition would be a property we bought in Austin last year called Anderson Arbor. Everyone loves Austin and it is growing, so Anderson Arbor is a property we bought that is part of a larger grouping of assets. The property is a neighborhood infill shopping center with great visibility and traffic levels and contains a local favorite breakfast restaurant called the Kerbey Lane Café. When people think of property anchors, they tend to think of grocery stores or large retailers.

We think of places that stand out. Kerbey Lane Café is well known in Austin and one of the traffic drivers for the property. Anderson Arbor is well-located and over time we will put our signature stamp on the property by making some changes to the physical aspects of the property including signage. It is very important for tenants that people know where they are and are easy to get to.

CEOCFO: Why do tenants want to be in a Whitestone shopping center?

Mr. Holeman: Tenants want their businesses to grow and thrive. Most of our tenants are entrepreneurs and they are providing jobs, they are helping to grow a business, so the first thing they want to do is grow. At Whitestone we have a process where we meet with our tenants regularly and we ask them what we can do to help their businesses. We try to truly understand the important things to them and make those changes to the properties.

Things we hear often from our tenants are recommendations for other businesses they would like to see in the centers, other businesses that would help their business. An example is another property in Arizona. We have a golf store that sells high-end custom golf clubs so many of their customers are older people and they said it would be great to have a sports medicine physician in the center and it would be very convenient for customers to come in and look at golf clubs when they came in for their doctor appointment.

We look to put together a tenant mix that helps them grow their businesses and we try to structure our contracts and arrangements with them in a simple clear way.

CEOCFO: “We got to the position we are in today by looking at retail differently. This means taking risks and redefining the measures of success.” Would you tell us what that means at Whitestone?

Mr. Holeman: Just like challenges every business has risks. We have fifteen hundred businesses that are our tenants and obviously when we are evaluating whether to fill a space with one or two tenants there are times when we say this has a little bit more risk in it but how we evaluate that is we get to know the tenant and look at their past history, their character and commitment. We try to evaluate risk from a deep perspective. We look at the quantitative analysis of risk with tenants when we buy a property. There is a qualitative aspect as well, which is the commitment, the involvement, the participation of tenants and we as a company try to evaluate that.

Regarding redefining the measures of success, I think that is a broader definition of success. Obviously, we are a public company, and we operate in the public markets, and we want to provide an outstanding return to our shareholders and that is one of our measures of success, but I think we also value the contribution we make in the community on whether we are helping the neighborhoods surrounding our properties become more attractive. We also define success as helping our associates develop and grow. Our goal is to grow our people in the organization. We strive to grow them into more senior roles with us but at times they leave and go into senior roles with others which is okay, and we take pride in being a part of their development. When we look at success, we look at the financial success of our business, we look at our impact in the communities we operate in, and we look at the development of people.

One of the things we do in the company is run an executive development leadership program that we call REED (Real Estate Executive Development). We target approximately five key employees in the company and put them through an eighteen-month program where we have outsiders come in and teach a lot of aspects of real estate. We define success by being impactful in several different stakeholder groups.

CEOCFO: What has changed in your approach over time?

Mr. Holeman: I have made a fair number of mistakes over my career; I am 58 years old and throughout my career I have been involved largely in public companies. I have a family with two grown children so over that time I made my share of mistakes. I have learned that you are going to make mistakes so step back and understand the mistakes and what you could have done differently. It is important to look at how you do not repeat mistakes and I think if you are not making mistakes, you are probably not stepping out like you should. We have a talented group of people that we allow to try things and make some mistakes.

Over my career when I think back to the mistakes I have made, it all comes back to surrounding yourself with good people, being open and honest and having a good self-awareness. I am new in the role of CEO. I have been in that role for about sixty days and prior to that I was CFO for the last fifteen years. I recognize that there are going to be new challenges in the CEO role. It is important to listen, engage, be open and surround yourself with smart people.

CEOCFO: What have your learned that surprised you when you recently took on the role of CEO?

Mr. Holeman: I have learned that sometimes change is good for an organization. It allows people that maybe did not have a voice, to have a voice. I have gotten to know more people within our organization. As a CFO I worked with more on the financial and capital side of the business, but I have had more engagements with our tenants over the last sixty days than I had historically. I have gained an appreciation for the entrepreneurial spirit. I have gained an appreciation for people that really put a commitment into a business and grow it. I have learned that lots of people have thoughts and ideas if you are willing to ask.

One of the things I have done over the last sixty days is do more listening than talking, so I have engaged with various investors, tenants, and employees. You find out that people have good ideas, and you find out that maybe there are people in the organization that can do more than previously done. Those were some of the exciting things I discovered. I cannot think of anything super negative. Maybe I am still in the honeymoon period where we are excited about the change but right now most of my findings are very positive.

CEOCFO: How is business?

Mr. Holeman: The business is in great shape. We closed our 2021 year and had very good operating results. Financially our earnings per share increased about a 4% from 2020. When you look at some of the non-recurring items, they were more like 8% normalized. The portfolio is performing very well, and it has performed very well throughout the pandemic. Obviously in the markets we are in there has been a little less impact from the pandemic, but the occupancy of our properties was well up almost 3% year-over-year, up from 88% and 91%. The 2021 activity we had from leasing was well above both our 2020 and 2019 levels.

We have made some very positive changes recently that we think will be impactful for our shareholders and give us greater access to capital. Those changes include decisive leadership changes, ending our shareholder rights plan, and separating the roles of Chairman of the Board and CEO.

We have also given financial guidance in the next year which includes earnings per share growth that is among the best in the public shopping center group and meaningful improvements in our overhead cost structure.

CEOCFO: Are investors paying attention? How does Whitestone RET stand out in a conference when there are other companies talking about themselves?

Mr. Holeman: That is a challenge, it is a crowded group. In our particular segment there are about twenty shopping center public real estate investment trusts. We wanted to differentiate ourselves from that group. One of the things people really like that makes us stand out is our targeted approach. We believe that real estate is very much a local business, and we have advantages by being very deep in the markets we are in, we are in the markets of many of our peers, but we believe in those markets we have a depth that they do not have because of our true concentrated focus. Geography makes Whitestone stand out and I think investors are looking for companies that have growth potential and I believe that Whitestone offers that.

We have a number of ways that we can grow our value for investors. We have a portfolio that is performing well organically. We also have a platform that we can grow through additional acquisitions. We have shared that for the first half of 2022 we are going to concentrate a little bit more organically. We are going to work with the leadership changes and continue to push leasing. We also are going to do some potential selling of property to recycle capital, and then we think this platform will be positioned to grow.

What makes us stand out is best in class geography. I think investors also like the fact that we are a little bit nimbler and that we focus on a particular type of retail that is different from your traditional shopping center, mall, or strip center.

CEOCFO: What if anything might a potential investor miss about Whitestone REIT, and what might a potential tenant miss that they should understand?

Mr. Holeman: Tenants are at the heart of Whitestone’s strategy to grow and succeed. We make sure our tenants see that we truly care about their success. We are not remote property owners. Rather we have boots on the ground and appropriate depth in markets we know well and serve well.  We also spend a lot of time ensuring that our centers have a great mix of tenants, in part because of our belief that tenant synergies are critical to their and our success. At the heart of our culture is the idea that we succeed in conjunction with our tenants.

From an investor perspective it is tough because of the crowded group. One thing people miss is the true value we believe we have in this portfolio. We have a great group of properties, but we also have the ability to extract additional value with attractive pad site development opportunities

Given the pandemic, there is a greater interest in restaurants with drive-throughs. What investors miss is that there is really significant additional embedded value in our portfolio that we can extract over the coming years. I get that they miss it because investors typically look at just historical numbers and what is reported, but I think one of the things we have to do is communicate better the true value within our portfolio and then clearly articulate our plan to extract that to the benefit of our shareholders.

Whitestone REIT | David K. Holeman | NYSE:WSR | Retail REITs, Shopping Center REITs, Mall REITs, New CEO Advances Whitestone REIT’s Ecommerce Resistant Community Shopping Center Strategy, CEO Interviews 2022, Financial Companies | Dave K. Holeman, Dave Holeman, David Holeman, Whitestone, Whitestone REIT Press Releases, News, Linkedin

“Tenants are at the heart of Whitestone’s strategy to grow and succeed. We make sure our tenants see that we truly care about their success. We are not remote property owners. Rather we have boots on the ground and appropriate depth in markets we know well and serve well.  We also spend a lot of time ensuring that our centers have a great mix of tenants, in part because of our belief that tenant synergies are critical to their and our success. At the heart of our culture is the idea that we succeed in conjunction with our tenants.” David K. Holeman